Inside 208

The Michigan Municipal League celebrates the passage of the federal 21st Century ROAD to Housing Act. Its strong bipartisan support demonstrates that federal leaders recognize the seriousness of our nation’s housing shortage and are committed to advancing solutions built on partnership, local leadership, and shared responsibility.

The final bill is a major win for local governments. Following a year of negotiation between the House, Senate, and White House, and an unusual, informal conference committee process that brought the housing package to the House and Senate Floors for three separate “final” votes, the House and Senate have at last passed identical versions of the “21^st Century ROAD to Housing Act”.

The final vote in the Senate was 85-5, and in the House 358-32.

The 21^st Century Road to Housing Act

The bipartisan housing package is a package of nearly 60 different stand-alone bills. The bill aims to increase housing supply, lower housing costs, and modernize federal programs and regulations that impact housing attainability. The bill authorizes a handful of new programs, but the bill itself is deficit-neutral and funding for those programs must be provided by the Appropriations Committee’s.

Nothing in the bill preempts local authority or establishes unfunded mandates.  In general, federal agencies are required to implement provisions over 12, 18, or 24 months following enactment, with a few exceptions providing even longer implementation windows.

Provisions in the bill directly championed by local government groups will:

• Streamline or waive federal requirements around environmental review and federal approvals.
• Enhance flexibility for grant programs like CDBG and HOME that are allocated directly to local governments.
  • CDBG eligible expenditures will now include new construction; and HOME eligible expenditures will include workforce housing and, in certain conditions, housing-related infrastructure.
• Provide other new resources to address infrastructure necessary for permitting additional housing.
• Provide new capacity assistance to local governments seeking to evaluate and amend local ordinances for the purpose of making housing more attainable. Such resources could reduce costs to local governments that would otherwise bring in consultants or other costly specialists to undertake such activities.
• Increase sources of private capital for housing development.

By design, the 21st Century ROAD to Housing Act does not preempt local or state zoning. As stated in Banking Committee documents, “Chairman Scott believes zoning decisions are best made locally, not in Washington.”

The bill is a great example of Congress choosing partnership over preemption to make housing more attainable.

 

Specific Provisions Championed and Supported by Local Government:

Sec. 212 – Rental Assistance Demonstration Program

This section lifts the cap on the Rental Assistance Demonstration (RAD) program by 100,000 units and codifies tenant protections.

• RAD converts public housing funded units to voucher funded units in order to lower the financing costs of maintenance and repair.

Sec. 504 – Reforming Disaster Recovery Act

This section permanently authorizes the Community Development Block Grant–Disaster Recovery (CDBG-DR) program and establishes the Office of Disaster Management and Resiliency within HUD to administer the program.

• Establishes consistency in the availability and regulation of housing aid following a disaster, rather than requiring Congress to pass new legislation, with new rules, each time a community requests disaster aid.

Sec. 102 – Federal Guidelines for Point Access Block Buildings.

Requires HUD to establish federal guidelines for point-access block buildings (i.e.,

single staircase apartments with three or more stories). It also allows HUD to award competitive

grants for pilot programs to assess the feasibility of such buildings where they make local sense.

• Directs coordination with the International Code Council
• New grant for local governments serves as incentive

Sec. 103 – Exemption on Construction or Modification of Residential Housing Located on an Infill Site.

Exempts most Rural Housing Service (RHS)-funded projects from NEPA requirements regarding the construction or modification of residential housing located on an infill site.

• Reduces federal regulatory burdens on cities and towns.

Sec. 105 – FHA Small-Dollar Mortgages.

Authorizes a HUD pilot program to increase access to small-dollar mortgages with original principal balances of $100,000 or less.

• Creates financing options to support the market for construction of smaller homes.

Sec. 202 – Whole-Home Repairs Act

This section establishes a 5-year pilot program at HUD to offer grants and forgivable loans to low-and moderate-income homeowners and qualifying small landlords to holistically address home repair needs and health hazards. The goal is to stabilize aging housing stock, preserve affordable units, and support neighborhood revitalization without creating new long-term federal entitlements.

• Authorizes new federal funding to preserve affordable housing and prevent blight

Sec. 203 – Community Investment and Prosperity Act

This section increases the statutory Public Welfare Investment cap that limits banks’ investments in community development projects from 15% to 20%.

• This provision permits banks to increase the amount they may invest in affordable housing.

Sec. 204 – Addition of Affordable Housing Construction as an Eligible Activity.

Adds new construction as an eligible use under HUD’s CDBG program.

• This additional flexibility enacts a long-sought priority for the CDBG program

 Sec. 205 – Better Use of Intergovernmental and Local Development (BUILD) Housing Act

This section cuts red tape around environmental reviews, empowering states, local governments, and Indian tribes to streamline reviews and increase housing development.

• Allows HUD to accept state or local environmental reviews that would be duplicative with federal NEPA housing review requirements
• Permits HUD to designate “special projects” that grant simplified and streamlined compliance requirements.

Sec. 206 – Unlocking Housing Supply Through Streamlined and Modernized Reviews Act

This section right-sizes National Environmental Protection Act (NEPA) review for small and infill housing projects, and adaptive reuse (office to residential conversions), which will simplify the review process and get projects to construction faster.

• Reduces federal regulatory burdens on cities and towns.

Sec. 207 – Grants For Planning and Implementation Associated with Affordable Housing.

Section 207 authorizes a pilot program to offer competitive grants to assist state, local, and tribal

governments with regional housing planning and community development activities.

• Supports Regional Councils and Metropolitan Planning Organizations undertaking housing planning assistance.

Sec. 208 – Innovation Fund

This section creates a competitive pot of highly flexible funding for communities that are building more housing supply. Funds can be used to improve community infrastructure, build housing, and supplement water and sewer grants.

• Authorizes new HUD grants for local infrastructure needs related to housing
• Provides a monetary incentive to local governments that demonstrate objective improvement in housing supply growth

Sec. 209 – Accelerating Home Building Act

This section establishes a HUD-administered grant program to help communities establish pre-approved housing designs, or pattern books, to help streamline and expedite local construction processes and build more homes.

• Authorizes new funding to support design standards and review for cities that choose to apply. Voluntary, not mandated.
• Sets aside 10% of available funds for small and rural areas

Sec. 210 – Revitalizing Empty Structures into Desirable Environments (RESIDE) Act

This section creates a competitive pilot discretionary program within the HOME Investment Partnerships program if the annual appropriation exceeds $1.35 billion to convert vacant and abandoned buildings into attainable housing.

• Authorizes new funding, in addition to existing HOME funds, for vacant and industrial property conversion to housing.  Eligible activities include buying abandoned buildings at market price, site clean-up and preparation, weatherization and energy efficiency upgrades, major repairs like plumbing, HVAC, and sewer, construction needed to create affordable homes

Sec. 302 – Modular Housing Production Act

Requires the Department of Housing and Urban Development (HUD) to review all construction lending programs administered by the Federal Housing Administration (FHA) and promptly address barriers that currently limit construction financing for modular homes

Sec. 304 – PRICE Act

This section authorizes HUD’s Preservation and Reinvestment Initiative for Community Enhancement (PRICE) Program to provide grants to communities to maintain, protect, and stabilize manufactured housing and manufactured housing communities.

• Authorizes new funding to support construction and maintenance of manufactured housing (Housing built in pieces off site. The bill contains several provisions to boost awareness of advances in manufactured and modular homes).

Sec. 404 – Helping More Families Save Act

This section establishes a pilot program under HUD’s Family Self-Sufficiency (FSS) initiative to promote economic mobility and homeownership by enabling more families to grow their household savings.

• This provision encourages more families with rental assistance to build long-term financial security by directing a portion of increased income, which would otherwise be spent on increased rent, into interest-bearing saving accounts.

Sec. 405 – Choice in Affordable Housing Act

This section will reduce HUD inspection delays by allowing units that are financed through other federal housing programs to automatically satisfy voucher inspection requirements if inspected within the past year. Additionally, the bill permits new landlords to request pre-inspections to increase access to housing for voucher holders and encourage landlord participation.

• Eliminates duplicative requirements on landlords as a barrier to participation in federal housing subsidy programs.

Sec. 501 – HOME Investment Partnerships Reauthorization and Reform Act

This section reauthorizes the HOME Investment Partnerships Program and makes critical updates to improve program administration and facilitate the construction of more affordable housing.

• Reauthorizes HOME which provides direct grants to local governments
• Adjusts up income limits for beneficiaries to “families with a household income that does not exceed 100 percent of the median family income of the area as determined by the Secretary with adjustments for smaller and larger families”
• Preserves local authority by stating “The Secretary may not restrict the choice by a participating jurisdiction of rehabilitation, substantial rehabilitation, new construction, reconstruction, acquisition, or other eligible housing uses authorized in paragraph (1) unless the restriction is explicitly authorized under section 223(2).”
• Permits HOME grantees that do not also receive CDBG to use grant funds for infrastructure improvements directly related to housing.

Sec. 502 – Rural Housing Service Reform Act

This section enacts reforms to the existing Rural Housing Service, including decoupling rental assistance from maturing mortgages to preserve affordable housing in rural areas.

Sec. 503 – Incentivizing Local Solutions to Homelessness

This section allows states and localities that receive Emergency Solutions Grant funding to request a waiver of the statutory 60 percent spending cap on emergency shelter beds and street outreach.

• Increases flexibility for Homeless Assistance Grants

Sec. 505 – New Moving to Work Cohort

This section authorizes a Moving to Work expansion cohort with targeted flexibilities to improve program administration and tenant outcomes.

• Increases flexibility for local housing agencies

Sec. 603 – Housing Unhoused Disabled Veterans Act

This section permanently excludes veterans’ disability compensation from annual income calculations under the HUD-VASH program to help more homeless veterans access VA housing.

• Reduces possibility of veterans losing aid due to strict income limits

Sec. 801 – HUD-USDA-VA Interagency Coordination Act

This section directs HUD, USDA, and the VA to identify areas for collaboration to streamline and improve housing program implementation.

• Improves interagency coordination on federal housing programs

Sec. 802 – Streamlining Rural Housing Act

This section directs HUD and USDA to coordinate on joint environmental reviews for housing projects funded by both agencies.

Sec. 804 – GAO Studies.

Directs the Government Accountability Office (GAO) to study key housing issues to help advance housing and economic opportunities for middle-income households and workforce housing, housing for the elderly or disabled, and generational retention of heirs properties.

Sec. 1001 – Homes are for People, Not Corporations.

Prohibits large institutional investors from purchasing certain single-family homes to promote homeownership opportunities for American families, not corporations

• No large institutional investor may purchase or enter into a contract to directly or indirectly purchase any single-family home, with exceptions.
• Enforces penalties on violators.

 

Provisions That Did Not Conflict with Local Government’s Top Priorities:

Sec. 101 – Reforms to Housing Counseling and Financial Literacy Programs

This section allows HUD to review the performance of housing counseling agencies and counselors. If a counselor’s performance falls short, HUD may require additional training and provide opportunities to demonstrate improvement. Counselors found to be consistently out of compliance may be subject to enhanced oversight or lose their certification.

Sec. 104 – Database of Publicly Owned Land.

Requires Community Development Block Grant (CDBG) grantees to maintain a publicly accessible, searchable database identifying undeveloped land owned by the jurisdiction.

Sec. 106. Temperature Sensor Pilot Program.

Establishes a HUD pilot program to award grants to public housing agencies and owners of federally assisted rental housing to install temperature sensors in dwelling units, with the written permission of tenants, to ensure compliance with temperature-related housing quality standards.

Sec. 201 – Increasing Housing in Opportunity Zones

This section enables the HUD Secretary to give added weight to applicants for competitive HUD grants that are located in, or primarily serve, designated Opportunity Zones to support housing preservation and construction.

Sec. 211 – Housing Affordability Act

This section increases the Federal Housing Administration’s (FHA’s) multifamily housing loan limits for mortgage insurance and requires the use of a more specific inflation index for these limits

Sec. 303 – Property Improvement and Manufactured Housing Loan Modernization Act

This section updates mortgage lending standards for manufactured housing through the FHA and expands access to financing for housing. The section also directs HUD to study the cost-effectiveness and long-term value of supporting factory-built housing finance options to address the nation’s housing shortages.

Sec. 401 – Creating Incentives for Small Dollar Loan Originators

This section requires the Consumer Financial Protection Bureau (CFPB) to issue a report to Congress studying the effect of various factors of loan originator compensation on the availability of small-dollar mortgage loans and to assess the barriers they pose to the availability of small-dollar mortgages to consumers. It also gives the CFPB the flexibility to amend rules to encourage small-dollar loan origination.

Sec. 402 – Small Dollar Mortgage Points and Fees

This section requires CFPB and the Federal Housing Finance Administration (FHFA) to evaluate the impact of existing regulations that limit the points and fees that lenders can charge on qualified mortgage loans, which vary by loan limit. Based on such evaluation, the provision directs CFPB to make any necessary regulatory changes to points and fees to help encourage additional lending for small-dollar mortgages.

Sec. 403 – Appraisal Industry Improvement Act

This section helps bolster the appraiser workforce capacity, including by allowing both licensed and credentialed appraisers to conduct appraisals for FHA-insured mortgage lending transactions.

Sec. 601 – Military Service Question.

Adds a disclosure to Fannie Mae and Freddie Mac’s uniform residential loan application form to ensure that veterans are made aware of their home loan benefits through the Department of Veterans Affairs (VA), which may provide a more affordable lending option

Sec. 603 – Veterans Affairs Loan Informed Disclosure (VALID) Act

This section improves transparency for veteran homebuyers by requiring FHA mortgage disclosures to include cost comparison information to make veterans aware of their home loan benefits through the VA and help them compare those options to FHA financing.

Sec. 701 – Requiring Annual Testimony and Oversight from Housing Regulators

This section requires annual testimony on housing and community development issues from the heads of HUD, FHA, Ginnie Mae, U.S. Department of Agriculture (USDA), FHFA, and the VA.

Sec. 702 – FHA Reporting Requirements on Safety and Soundness

This section requires HUD to report monthly to Congress on the state of statutorily required capital ratio of the Mutual Mortgage Insurance Fund, including a notice to Congress any time that ratio falls below statutorily required levels.

Sec. 703 – United States Interagency Council on Homelessness (USICH) Oversight

This section requires USICH to provide an update on the status of the plan to reduce homelessness in its annual planning process and requires annual USICH Congressional testimony.

Sec. 704 – Appraisal Modernization Act

This section requires mortgage lenders to maintain procedures to allow for consumer-initiated requests for second appraisals, or reconsiderations of value, when they believe there may be an issue with their appraised home value.

Sec. 803 – Improving Self-Sufficiency of Families in HUD-Subsidized Housing

This section directs HUD to conduct a study on the implementation of work requirements by public housing agencies, with an assessment of the challenges and benefits of work requirements on public housing agencies and families, including the effects on homelessness, poverty, asset building, job attainment, and public housing agency administrative capacity.

Sec. 805 – Improving Public Housing Agency Accountability.

Subjects public housing agencies (PHAs) to additional disclosure and oversight requirements, including enhanced reporting requirements for PHAs that are in receivership or subject to a monitor. It also adds certain requirements for the HUD Inspector General as it relates to PHA oversight.

Sec. 901 – Community Bank Deposit Access.

Establishes that custodial deposits of an insured depository institution are not considered to be brokered deposits if the total amount does not exceed 20% of an institution’s total liabilities and the institution has less than $10 billion in assets and meets certain other criteria.

Sec. 902 – Keeping Deposits Local.

Modifies the amount of reciprocal deposits of an insured depository institution that are not considered to be brokered deposits under a graduated scale based on an institution’s total liabilities. The institution is also required to be well-capitalized and receive strong supervisory ratings from its regulators.

Sec. 903 – Tailored Regulatory Updates for Supervisory Testing.

Raises the consolidated asset threshold from $3 billion to $6 billion for insured depository institutions to qualify for an 18-month examination cycle.

Sec. 904 – Credit Union Board Modernization.

Amends the Federal Credit Union Act to revise the frequency of meetings that a federal credit union’s board of directors is required to hold.

Sec. 905 – Systemic Risk Authority Transparency.

Requires the GAO and appropriate Federal banking regulators to issue reports within

specified timeframes when the Federal Deposit Insurance Corporation (FDIC) invokes the systemic risk exception, detailing causes of bank failures, regulatory actions, and any management or supervisory shortcomings.

Sec. 906 – Advancing the Mentor-Protégé Program for Small Financial Institutions.

Directs the Department of the Treasury to establish a mentor-protégé program pairing large financial institutions with other depository institutions, with the goal of enhancing their capacity to serve customers and potentially act as financial agents.

Sec. 907 – American Access to Banking.

Directs Federal banking and credit union regulators to streamline the de novo application process, reduce duplicative information requests, and review capital-raising restrictions, particularly for non-accredited investors.

Sec. 908 – Promoting New Bank Formation.

Creates a two-year phase-in pilot for de novo financial institutions to meet Federal capital requirements.

Sec. 909 – Rural Depositories Revitalization Study.

Requires Federal prudential regulators to jointly study ways to improve the growth, capital adequacy, and profitability of rural depository institutions and to identify regulatory barriers to these goals and to the formation of new depository institutions, with a report to Congress due within one year of enactment.

Sec. 1101 – Central Bank Digital Currency.

Prohibits the Federal Reserve from issuing a central bank digital currency through December 31, 2030.

Sec. 1201 – Severability.

Provides a severability clause for the legislation.

• A severability clause protects laws stemming from the bill from being completely voided if a court finds one part of the law unconstitutional

Sec. 1202 – No Additional Funds Authorized.

Stipulates that the bill remains budget-neutral and programs authorized in the bill should not result in an overall increase in federal budget

 

Provisions That May Raise Concerns:

Although the overall bipartisan housing package is a major win for local governments, a small number of provisions nonetheless have raised concerns and those have been communicated to Members of Congress.  We continue to work with our federal partners to advocate in the interest of local governments as these provisions go through the regulatory process.

Sec. 213 – Build Now Act

This section creates a pilot program to incentivize housing development of all kinds in Community Development Block Grant (CDBG) participating jurisdictions, excluding states CDBG grants for small cities.

• • The impact of this provision is limited to the approximately 1,250 metropolitan cities and counties that receive annual CDBG formula grants.
  • The small cities CDBG program that states sub-allocate to non-metro cities on a competitive basis is unaffected.
  • The bill requires HUD to measure the growth of housing units (Housing Growth Improvement) in a grantee’s jurisdiction over a five-year period. Local governments are not measured against each other – the calculation is solely based on the housing units in the grantee’s own jurisdiction.
    • Grantees that achieve a Housing Growth Improvement Rate above the median growth rate of all CDBG grantees will be allocated bonus CDBG funding for the year, for an amount up to 10% of the grantee’s total CDBG allocation. High-growth CDBG grantees will be excluded from the median calculation to prevent against an artificially high median,
    • Grantees that perform below the median Housing Growth Improvement Rate will have their annual CDBG allocation decreased by 10% for the year. The funds captured by any decrease are the source of funds for bonuses to above median cities.
    • Grantees within range of the national median will receive neither a reduction nor a bonus.
  • Certain criteria would excuse grantees with below median growth rates from the reduction in funds. The criteria is mostly aimed at excusing grantees where housing demand is not naturally high. These include:
    • The grantee’s Small Area Fair Market Rent is below the 60^th percentile of the media of all grantees,
    • The annual rental vacancy rate is higher than the national annual natural rental vacancy rate.
    • The grantee was subject to a natural disaster or federal emergency declaration over the course of the prior year.
    • The grantee is prohibited by state law from adopting or amending relevant zoning or permitting ordinances.
  • Concerns were raised with this section but given numerous outright positive provisions for local governments in the overall bill, it was not reason to object to its passage.
    • Under the provision, there would be no overall decrease in CDBG funding for allocation by formula to local governments. This makes the provision distinct from other CDBG tampering we have strongly opposed in the past, such as bills that would withhold CDBG funds from “sanctuary cities” without reallocation to other local government grantees. Unlike proposals that would withhold CDBG grant funding for various reasons, this provision would not jeopardize any grantees eligibility for a CDBG grant.
    • The provision is not an unfunded mandate on grantees and is not a preemption that eliminates existing local government authority.

John LaMacchia is the League’s director of state & federal affairs. He can be reached at [email protected] or 517-908-0303.